Tax season can be stressful, but it doesn’t have to be.

By adopting some smart habits, you can reduce your stress and maximize your tax savings. Saving more money now can have a significant impact on your financial future.

Whether you aim to build an emergency fund, pay off debt, or save for a big purchase, the extra cash you save during tax season can make a real difference.

In this article, we’ll discuss 7 practical habits you can implement to boost your savings come tax time. By following these tips, you’ll be well on achieving your financial goals.

So, let’s explore how you can make the most of tax season and maximize your savings.

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#1: Start Early with Tax Planning

One of the most effective ways to maximize your savings next tax season is to start planning early.

Don’t wait until the last minute to scramble for documents and determine your deductions. By planning throughout the year, you can avoid stress and potential mistakes and ultimately save more money.

How can you organize your financial records and plan for tax season? Let’s find out:

• Gather and organize your documents: Throughout the year, collect all your financial documents, including receipts, bank statements, investment records, and pay stubs. Keep these documents in a designated folder or digital filing system for easy access.

• Track your deductions: Be aware of potential deductions and credits for which you may be eligible. Keep track of your annual expenses, such as charitable donations, business expenses, and education costs.

• Consider using tax software: Software can help you identify potential deductions and credits and calculate your tax liability.

Starting early with your tax planning can reduce stress, avoid mistakes, and save more money.

Remember, the key is to be organized and proactive throughout the year.

#2: Leverage Tax-Advantaged Accounts

One of the most powerful ways to maximize your savings next tax season is to take advantage of tax-advantaged accounts.

These accounts allow you to invest your money on a pre-tax or tax-deferred basis, significantly reducing your taxable income and increasing your overall savings.

Some of the most common tax-advantaged accounts include Individual Retirement Accounts (IRAs), 401(k)s and Health Savings Accounts (HSAs).

To maximize your savings through tax-advantaged accounts, consider the following strategies:

• Contribute the maximum amount allowed: The IRS sets annual contribution limits for these accounts. Aim to contribute the maximum amount you can afford each year.

• Start contributing early: The earlier you start contributing, the more time your investments have to grow.

• Choose wisely.: Research different investment options within your tax-advantaged accounts to find the ones that align with your risk tolerance and financial goals.

• Consider a Roth conversion: If you have a traditional IRA or 401(k), you can convert it to a Roth IRA. This can provide tax-free withdrawals in retirement.

Leveraging tax-advantaged accounts can significantly boost your savings and reduce your tax liability. Start exploring these options today and take advantage of their benefits.

#3: Keep Track of Deductible Expenses

One essential habit for maximizing your savings next tax season is keeping track of your deductible expenses.

Deductions can significantly reduce your taxable income, which means more money in your pocket. Common deductible expenses include:

• Mortgage interest

• Charitable donations

• Business expenses

• Education expenses

• Medical expenses

Tracking your expenses throughout the year is important to ensure you get all potential deductions. There are a variety of tools and apps available to help you with this, including:

• Expense tracking apps: These apps allow you to record your expenses and easily categorize them by type.

• Digital receipts: Many businesses now offer digital receipts, which can be stored and organized electronically.

• Cloud storage: You can use cloud storage services to store your financial documents and receipts.

By accurately tracking your deductible expenses, you can maximize your deductions and reduce your tax liability. This can put more money back in your pocket and help you achieve your financial goals.

#4: Stay Informed on Tax Law Changes

Tax laws and regulations can change from year to year. Staying informed about these changes is crucial for maximizing your savings and avoiding penalties.

By understanding the latest tax laws, you can adjust your strategies and take advantage of any new deductions or credits that may be available.

Here are some resources for staying informed about tax law changes:

• IRS website: The IRS website is an excellent source of information on tax laws and regulations. It often publishes updates and announcements.

• Tax blogs: Many tax professionals and financial experts run blogs discussing the latest tax news and trends.

• Professional advice: If you’re unsure about a specific tax law change or need personalized advice, consider consulting with a tax professional.

By staying informed about tax law changes, you can ensure you’re taking advantage of all available deductions and credits. This can help you save more money and reduce your tax liability.

#5: Consult with a Tax Professional

While you can certainly do your own taxes, hiring a tax professional can be a valuable investment.

A qualified tax professional, such as a Certified Public Accountant (CPA) or a tax advisor like doola, can help you navigate tax laws and maximize your savings.

Here are some of the benefits of working with a tax professional:

• Expertise: Tax professionals have in-depth knowledge of tax laws and regulations. They can help you identify deductions and credits that you may have missed.

• Time savings: Preparing your taxes can be time-consuming and stressful. A tax professional can handle the paperwork and calculations, freeing up your time.

• Peace of mind: Knowing that your taxes are handled by a qualified professional gives you peace of mind.

• Avoid penalties: Mistakes on your tax return can lead to penalties and interest. A tax professional can help you avoid these costly errors.

A tax professional can help you identify additional deductions and credits you may be eligible for.

They can also help you understand the latest tax laws and regulations and ensure your tax return is filed correctly.

When choosing a tax professional, look for someone who is qualified, experienced, and reputable. You can ask for referrals from friends, family, or colleagues.

You can also check online reviews and ratings to see what other clients have to say about their experience.

Consulting with a tax professional can maximize your savings and ensure that your taxes are filed correctly. It’s a wise investment that will pay off in the long run.

#6: Optimize Filing Status and Exemptions

Choosing the proper filing status can significantly affect your tax liability.

The IRS offers several filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Widow(er).

Each status affects your tax bracket, deductions, and credits. Let’s find out how:

Single:

• For unmarried individuals.

• Typically, it has the highest tax rates, but it is straightforward.

Married Filing Jointly:

• Combines income with your spouse, potentially lowering your tax bracket.

• Offers access to several credits and deductions not available separately.

Married Filing Separately:

• It is ideal if one spouse has significant medical expenses or miscellaneous deductions.

• Usually, it results in a higher tax bill, but it can be beneficial in specific situations.

Head of Household:

• For unmarried individuals who pay more than half the cost of keeping up a home.

• Must have a qualifying dependent, like a child or relative.

• Offers lower tax rates and a higher standard deduction than Single.

Qualifying Widow(er):

• It applies if your spouse passed away in the last two years and you have a dependent child.

• Allows you to use the Married Filing Jointly tax rates for a limited time.

Strategies for Choosing the Most Beneficial Filing Status:

Married Couples:

• Calculate both joint and separate filings to see which offers the most savings.

• Consider consulting with a tax professional for personalized advice.

Single Parents:

• If you qualify, opt for Head of Household to benefit from lower tax rates and a higher deduction.

Recently Widowed:

• Use the Qualifying Widow(er) status to retain favourable tax rates, if eligible.

Now that you understand the filing statuses, let’s talk about exemptions and dependents. Exemptions used to be a more significant part of tax savings, but the Tax Cuts and Jobs Act of 2017 eliminated personal exemptions.

However, dependents still play a crucial role in maximizing your tax savings. Each dependent you claim can qualify you for valuable credits like the Child Tax Credit, which can reduce your tax bill by up to $2,000 per child. If you have dependents, make sure you’re taking advantage of these credits.

Choosing the proper filing status and understanding the role of dependents can significantly impact your tax bill. Take the time to review your options.

By optimizing your filing status and claiming all eligible dependents, you can ensure you’re not leaving money on the table next tax season.

#7: Review and Adjust Withholdings Regularly

Regularly reviewing and adjusting your tax withholdings is a smart habit that can save you money.

You need to review your withholdings to avoid overpaying or underpaying your taxes. Overpaying means the IRS holds your money interest-free until you get a refund. Underpaying can lead to penalties and a surprise tax bill.

Life changes like getting married, having a child, or changing jobs can affect your tax liability. When these changes happen, it’s important to adjust your withholdings.

For example, if you get a raise and don’t adjust your withholdings, you might owe more at tax time. On the other hand, if your income drops, you might be overpaying and giving the IRS more than necessary.

Adjusting your withholdings ensures you’re not giving the government an interest-free loan. It also helps you avoid the stress of a large tax bill.

You can do this by submitting a new Form W-4 to your employer. The W-4 tells your employer how much to withhold from your paycheck for federal taxes.

You can use online tools and calculators to figure out the right amount to withhold. The IRS offers a withholding calculator that helps you determine the optimal amount.

By entering your income, filing status, and other details, the calculator gives you a clear picture of whether you need to adjust your withholdings.

Regularly reviewing your withholdings keeps your finances in check and ensures you’re not caught off guard at tax time. It’s a simple step that can prevent financial surprises and help you manage your money better throughout the year.

Don’t wait until tax season — check your withholdings now and adjust as needed.

Mastering Taxes With doola

Adopting these seven smart habits can significantly increase your savings next tax season and improve your overall financial health. Remember, it’s never too late to start saving. Even small changes can make a big difference over time.

So, what are you waiting for? Start implementing these habits today and watch your savings grow. With a little effort and planning, you can achieve your financial goals and enjoy a more secure future.

Still, have doubts? That’s where doola comes in!

Our tax package tackles the complexities of tax filing, ensuring you claim every deduction you deserve. This means more money flowing back to you, allowing you to scale your business.

Schedule a consultation with a doola tax expert today. We’ll answer your questions, tailor our services to your unique situation, and show you just how much you can save on taxes.